Magazine

Published in May 2012

Mandate Clarity

By PLANSPONSOR staff | June 2012
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Employer mandate, waiting period and auto-enrollment issue

Illustration by Jordan Isip

The Internal Revenue Service (IRS), the Department of Labor (DOL) and the Department of Health and Human Services (HHS) recently issued guidance (IRS Notice 2012-17; DOL Technical Release 2012-1) in the form of frequently asked questions (FAQ) about various issues related to the Patient Protection and Affordable Care Act (PPACA) employer mandate, waiting period limitation and auto-enrollment requirement. Below, we discuss several questions we have received about these PPACA provisions.

When will employers be required to implement the PPACA auto-enrollment requirements?  

PPACA added section 18A to the Fair Labor Standards Act (FLSA), which requires employers with 200 or more full-time employees to automatically enroll new full-time employees in one of the employer’s health plans and to continue the enrollment of current employees. Agency FAQ guidance issued in 2010 stated that employers would not be required to comply with the requirement before DOL regulations became applicable. The recent FAQ guidance states that the DOL has concluded that its regulations will not be ready to take effect by 2014, as previously projected, and until regulations are issued, employers will not be required to comply with the auto-enrollment requirement. Furthermore, it states that the DOL is working to coordinate the guidance with the employer mandate and waiting period guidance.

Could an employer be subject to an employer mandate penalty for not offering health coverage to an employee during a 90-day waiting period? 

The new FAQ guidance indicates that future U.S. Treasury Department and IRS-proposed regulations will address coordination of the employer mandate and waiting period limitation rules; it is expected to provide that an employer will not be subject to an employer mandate penalty for failing to offer coverage to an employee during the first three months after his date of hire.

Are the agencies planning to permit employers to use lookback and stability periods to identify full-time employees for purposes of the employer mandate? 

The recent FAQ states that the Treasury and IRS intend to issue proposed regulations or other guidance that would allow employers to use “lookback periods” and “stability periods” of up to 12 months, for purposes of determining full-time status of current employees, as previously described in Notice 2011-36.

Will the PPACA 90-day limitation on waiting periods effectively require employers to offer coverage to part-time employees after they have worked 90 days?  

The recent FAQ states that the waiting period limitation does not require employers to offer coverage to part-time or any other classification of employees (indeed, employers may exclude part-timers or other classifications of employees from coverage entirely). Instead, the PPACA waiting period limitation merely prohibits requiring “otherwise eligible” employees to wait more than 90 days before coverage is effective.